* Euro gains as risk aversion cools; up 1 pct vs dlr <EUR=>
* East Europe rally, Steinbrueck comments also support euro
* Yen pressured due to worry about Japan's economy
(adds quotes, updates prices, changes byline)
By Jessica Mortimer
LONDON, Feb 19 (Reuters) - The euro gained broadly on
Thursday, a day after hitting a three-month trough against the
dollar, as stocks gained and recently battered eastern European
currencies rallied.
World stocks <.MIWD00000PUS> rallied on some
better-than-feared corporate results, helping cool extreme risk
aversion and denting the safe-haven bid to the dollar.
The euro's rise was also underpinned by gains in eastern
European currencies as policymakers in the region scrambling to
protect them [].
Major concerns about the outlook for the global economy and
about severe problems in eastern Europe hitting western European
banks have far from gone away, however, and analysts see the
moves more as profit-taking than a change in sentiment.
"To some extent the extreme gloom of the last couple of
weeks is not getting any more fuel," Stockholm-based SEB
currency strategist Johan Javeus said.
"The euro has weakened in the last few days and is now
coming back," he said, adding: "Eastern Europe has seen a huge
sell-off and there has to come a point where we see a rebound,
if only just to take profit.
Further support for the euro came as German Finance Minister
Peer Steinbrueck repeated comments that euro zone countries may
be forced to help a fellow member state if it encountered
serious financial problems, analysts noted.
At 1244 GMT, the euro climbed 1.2 percent to $1.2691 <EUR=>,
recovering from a three-month low of $1.2511 touched the
previous day.
Meanwhile, the yen remained under pressure due to worries
about the Japanese economy -- which suffered its deepest
contraction in more than three decades in the latest quarter --
and political uncertainty as voter support for Prime Minister
Taro Aso sinks. [] [].
Overnight, the Bank of Japan left interest rates at 0.1
percent and extended the deadline for buying commercial paper to
help corporate funding.
The single currency rose around 1 percent against the
Japanese currency to hit a 9-day high of 118.91 yen <EURJPY=R>.
The dollar dipped 0.1 percent to 93.66 yen <JPY=>, having
hit a six week high on Wednesday at 93.96 on trading platform
EBS.
E. EUROPEAN CURRENCIES RISE
Concerns over the exposure of euro zone banks to the
recession in eastern Europe were heightened after a report from
credit ratings agency Moody's earlier this week, bringing the
euro under heavy pressure.
A bounce in central and eastern European currencies on
Thursday, however, which clawed back some of this week's steep
losses was cited as a positive for the euro on Thursday.
Comments from Steinbrueck, repeating those earlier this week
[], that euro zone countries may have to come to the
aid of troubled members also helped the common currency.
Analysts at Goldman Sachs said it appears that euro zone
policymakers "do have how to deal with a sovereign bailout
within the euro zone".
This being the case it would "substantially reduce the
probability of an EMU breakup," they said in a note to clients.
Analysts believe, however, that the current cooling in risk
aversion and consequent euro strength will only be temporary.
"The outlook for the euro remains extremely challenging,
perhaps people are just taking profit on some of the moves we've
seen in east Europe but nothing's really changed and the euro
zone remains vulnerable because of its massive lending to that
region," said RBS strategist Paul Robson.
(Reporting by Jessica Mortimer; Additional reporting by
Kirsten Donovan; Editing by Victoria Main)
